Bill: Cut federal benefits to help avert new defense sequester

Dec. 4, 2013 - 06:00AM
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Most federal workers would contribute more to their pensions under a newly introduced bill as part of the price for canceling fresh rounds of defense spending cuts.

For active participants in the Federal Employees Retirement System, the bill would increase their contributions from 0.8 percent of salary to 2.0 percent over a three-year phase-in period, according a summary by one of the sponsors, Rep. Jim Bridenstine, R-Okla. The legislation would also end the annuity supplement for new FERS employees who retire before age 62 (when they are not yet eligible for Social Security) and use the “chained consumer price index” to calculate future cost-of-living pension adjustments instead of the current CPI.

The Obama administration endorsed all three ideas in its fiscal 2014 budget request. Bridenstine’s bill incorporates other administration-backed proposals, such as cutting some farm subsidies and raising Medicare Part B premiums for new enrollees, as a means of saving some $300 billion over the next decade in comparison with projected spending levels. While the bulk of those savings would be used for deficit reduction, about $100 billion would be used to head off sequester-related budget cuts for the Defense Department in fiscal 2014 and 2015.

“Congress needs to give our military relief rather than use it as a punching bag,” Rep. Doug Lamborn, R-Colo., who is co-sponsoring the measure, said in a news release.

The bill comes as federal employee advocates increasingly worry that benefit cuts will be part of any deal for a full-year fiscal 2014 spending bill to replace the existing continuing resolution. A House-Senate conference committee is supposed to reach an agreement by mid-month; requiring federal workers to bear “a disproportionate burden of deficit reduction” is unfair and will lead to a recruitment and retention crisis, National Treasury Employees Union President Colleen Kelley said in a Wednesday letter to committee members.

In its 2014 budget request, the White House said that most economists agree the chained CPI is a better inflation gauge than the standard CPI because it accounts for consumers' tendency to switch to cheaper items when the price of other goods rises. Over the next decade, the switch to a chained CPI would cut projected future deficits by at least $230 billion, according to the request.

Critics counter that the chained CPI doesn't account for medical costs which make up a larger share of expenses for older people than for the population as a whole. Over time, they say, using the chained CPI to calculate cost-of-living-increases for pensions and Social Security benefits could cost recipients thousands of dollars that they would otherwise receive under the standard CPI.